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Fossil Fuel Subsidy Reform Roundtable Highlights a Global Problem

On April 11 in connection with the spring World Bank/International Monetary Fund meetings taking place in Washington, D.C., representatives of G-20 and APEC member economies and other countries and international organizations met on the problems resulting from fossil fuel subsidies around the world and discussed current and future actions.

This event was organized by New Zealand on behalf of Friends of Fossil Fuel Subsidy Reform (Costa Rica, Denmark, Ethiopia, Finland, New Zealand, Norway, Sweden, Switzerland), the United States, and the World Bank. High-level officials from industrialized, developing, and emerging market economies participated to assess progress, discuss various actions governments are taking, and to consider points that could apply elsewhere. I was pleased to join colleagues from the Treasury Department and other United States Government agencies and lend the technical expertise of the Bureau of Energy Resources at the United States Department of State.

There is growing -- and much needed -- global awareness of the negative consequences from inefficient fossil fuel subsidies. The International Monetary Fund reports that in 2011 these subsidies were as high as $480 billion. Besides being a substantial cost to governments -- in some cases subsidies for fossil fuels and power account for 20 percent or more a government’s budget – these subsidies generally fail to meet the needs of the poor while distorting energy consumption and exacerbating problems of pollution and greenhouse gas emissions. In other words, fossil fuel subsidies undermine shared economic, environmental and energy security goals, inflate energy prices for industry and consumers everywhere, and boost wasteful energy consumption. By distorting price signals, fossil fuel subsidies programs in various countries work against the economic interests of energy importers and exporters.

The Roundtable is just a recent example of the sustained and growing attention governments, academics, businesses, NGOs, and international economic institutions are giving this important energy, economic and environmental issue.

At last year’s G-20 Summit, leaders reaffirmed their commitment made in 2009 at the Pittsburgh Summit “to rationalize and phase out inefficient fossil fuel subsidies that encourage wasteful consumption.” The United States and China have committed to a peer review process under the G-20. APEC leaders made similar commitments in 2011, and reiterated them most recently in 2013, when leaders recognized “there is a clear and important role for APEC member economies to show leadership towards rationalizing and phasing out inefficient fossil fuel subsidies that encourage wasteful consumption.” APEC economies Peru and New Zealand will begin peer reviews of their efforts to reduce these harmful subsidies later this year.

For the Bureau of Energy Resources at the United States Department of State, this remains a key area for our technical work and diplomatic engagement as we work with partners throughout the world to make needed progress in achieving fossil fuel subsidy reform.

About the Author: Robert F. Cekuta serves as Principal Deputy Assistant Secretary of State for the Bureau of Energy Resources.